Phone Works Inside Sales Compensation Report - Q1 2002

In our 2001 Report, we wrote about the pressures of the economic downturn on the “Chief Revenue Officer”. One year later revenue-generation is still top priority, and the VP of Sales is the key management team member to whom companies and investors look to ensure making the numbers. But with continued quarterly losses, start-up closures, and larger company lay-offs, would the top sales executive’s compensation package take a hit? Our 2002 VP of Sales Compensation Report reveals the answers.

About the Surveyed Companies

We surveyed small- to mid-size business-to-business technology companies in northern California. Six percent have headquarters in San Francisco, 16 percent in the East Bay, and 78 percent in South Bay or Peninsula. Seventy-one percent are privately held companies in various stages of funding, from seed capital to mezzanine-level financing. Seven percent of the public companies have annual revenues greater than $250M. The total number of employees at the surveyed firms ranges from 10 to 600.

Ninety-seven percent of surveyed companies sell enterprise products and services. Sixty percent have an ASP model. Forty percent offer subscription services, while none of the companies used advertising or sponsorships to generate revenues. Twenty-five percent of the companies classified themselves as e-commerce companies.

Total Compensation Drops Only Slightly

Table 1, below, displays the average base salary, commission, bonus, total package and average sales price of company products for the senior sales executives we surveyed. We also show the percentage change in the same categories from last year’s survey. Please note that, unlike last year, we are reporting separate results for different titles of senior sales managers: Senior or Executive Vice President, Vice President, and Director.

Compensation for Senior Sales Executives
	Base Salary	Commission	Bonus	Total Package	Average Sale Price
Sr. or EVP	Avg: $214K Range: $120-375K	Avg: $174K Range: $50-375K	Avg: $105K Range: $50-160K	Avg: $383K Range: $200-750K	Avg: $278K Range: $500.00-1M
VP	Avg: $164K Range: $100-225K	Avg: $125K Range: $14-200K	Avg: $89K Range: $10-180K	Avg: $310K Range: $200-400K	Avg: $266K Range: $10K-1M
Director	Avg: $116K Range: $72-150K	Avg: $121K Range: $50-163K	Avg: $55K Range: $50-60K	Avg: $273K Range: $225-300K	Avg: $329K Range: $63-575K
Change Avg. of all 3 categories	Up 2%	Down 13%	Down 4%	Down 6%	N/A

Table 1. Average compensation, compensation ranges and % change from last year.

Base salaries were up two percent, but gone are the days of huge signing bonuses and non-recoverable draws as “givens”. Quarterly or annual bonuses are still being awarded to sales executives who achieve or exceed MBOs or revenue targets. Fifty-five percent receive either these kinds of individual bonuses or bonuses awarded when the whole company meets its objectives.

In privately held companies especially, stock and stock option grants remain a strong component of executive compensation. The industry average ranged from less than one percent to four percent. Vesting is still predominantly over four years, although 16 percent reported a 3-year vesting period. Twenty-nine percent had a one-year cliff. Eighty-four percent of the companies we surveyed provide full or partial vesting upon change of control of the company.

Stock Compensation
Position	% OF COMPANY- PRIVATELY HELD	% OF COMPANY-PUBLIC
Sr. or EVP	Avg: 2% Range: 1-3%	Avg: .6% Range: .5 – 1%
VP	Avg: 1.6% Range: < 1-4%	Avg: .5% Range: .5%
Director	Avg: .7% Range: < 1-1%	N/A
Change - Average of all 3 categories	1.4%	.55%

Table 2. Stock Compensation

Compensation Directly Related to Responsibilities

As was true in last year’s survey, quota (and compensation) increases with the size of sales staff. Table 3 below shows the average annual quota, average number of direct reports and average size of sales staff, as well as increases or decreases over last year’s survey. Sales quotas are down slightly while the ratio of staff to management has gone up considerably with reduced headcount and budgets.

Compensation for Various Sales Positions
	Average Sale Price	# of Direct Reports	Size of Sales Staff
Sr. or EVP:	Avg: $69M Range: $2-235M	Avg: 12 Range: 5 - 15	Avg: 151 Range: 4 - 500
VP:	Avg: $15M Range: $2-90M	Avg: 10 Range: 0 - 37	Avg: 25 Range: 4 - 200
Director:	Avg: 3.4M Range: $1-8M	Avg: 3 Range: 1 - 6	Avg: 4 Range: 2 - 6
Change:	Down 7%	Up 29%	Up 36%

Table 3. Compensation for Various Sales Positions

Seventy-four percent of the sales executives surveyed have worldwide responsibility. The average tenure of these executives is 12 months and none has been in his or her position for longer than three years. In a position where performance (or lack thereof) is easily measured based on sales results, there continues to be high turnover.

Multiple Sales Channels Still Key

Which channels of distribution are being used? All the companies we surveyed have field sales employees or are planning to in the near future, 74 percent use or plan to use inside sales, 84 percent use or plan to use telemarketing, 70 percent use or plan to use resellers, 58 percent use or plan to use VARs, and 67 percent sell or plan to sell to and through OEMs.

Summary

The industry downturn may have negatively affected the paychecks of many a VP of Sales, but our data show their target compensation packages have remained relatively constant. Table 4 below shows a summary of compensation trends for the last two years.

Table 4. Comparative Compensation from 2000-2002

In a time when revenue-generation is priority #1, compensating the top sales executive (and his or her team) generously based on results-achievement is not only good sense, its is critical to a company’s success.

This compensation survey is provided as a complimentary service by Phone Works, Inc., the San Francisco Bay Area’s leading sales consulting firm. Phone Works helps technology firms achieve rapid, sustainable revenue growth and implement successful, repeatable sales models while shortening the sales cycle. The industry’s largest technology companies and newest start-ups turn to Phone Works for lead-generation, lead-qualification, telesales and sales-productivity programs.

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You can reach Phone Works at 510.749.9073.